And for the first time the government has taken aim at system integrators providing unlicensed software to their users, as well as illegal online software swapping and downloading.

The State Copyright Bureau, the Ministry of Information Industry (MII), the Ministry of Public Security and the State Administration for Industry and Commerce earlier this month issued "implementing regulations" designed to quash software piracy.

The regulations called for increased co-ordination to crack down on piracy in the market for pre-installing software with a focus on hardware vendors and system integrators.

The regulations said the government will make "serious" efforts to crack down on illegal transference of software via the Internet.

Further details of the regulations are not available.

Most PC vendors pre-install computers with operating systems and office automation software to attract buyers while system integrators provide corporate users with a package of software products.

Piracy in pre-installing and system integration sectors has risen rapidly, experts said.

"Piracy related to system integrators has become a compelling issue as it involves a large amount of software sales," said Gao Qun, deputy secretary-general with China Software Alliance.

Increased government efforts to clamp down on pirated software peddlers on the street have pushed software pirates towards the pre-installing and system integration sectors, he said.

Government agencies and corporate users are the major buyers of legitimate software products in China as most individuals in the country are indifferent to copyright.

Microsoft, the world's No 1 software maker and the biggest victim of rampant software piracy in China, welcomed the move by the Chinese Government.

"The Chinese Government has been strengthening IPRs (intellectual property rights) protection in the country," a Microsoft spokeswoman said.

"It (the new move) further underscores the government's firm determination."

Microsoft's popular operating systems and office automation software are widely pirated in China.

Li Kaifu, vice-president of Microsoft, told China Business Weekly last year the company's sales in China from individual users are quite small due to widespread piracy.

Microsoft's sales may receive a boost from the government's intensified crackdown on piracy.

Gaming software makers will be the major beneficiaries from the government crackdown on illegal online software swapping and downloading. These have become quite common following the increasing penetration of broadband in the country, Gao said.

But implementing the crackdown will be a tough task given the nature of the openness of the Internet, he warned.

Rampant piracy has dampened growth of home-grown software makers, which are pushing the government to increase its efforts to crack down on the illegal trade, he said.

The domestic software industry is an assortment of small-scale enterprises that have little domestic or international market share.

The products are perceived as inferior to those of their foreign counterparts.

Hu Kunshan, vice-president of China Software Industry Association (CSIA), said nine ministry-level agencies worked out 13 regulations at a joint meeting in March to breathe life into the domestic software sector.

The government has vowed to increase annual software sales in China to 250 billion yuan (US$30 billion) by 2005, and help boost the share of domestic makers to 60 percent.

Software sales in the first four months reached 45 billion yuan (US$5.4 billion).

Anti-piracy efforts are one of the 13 regulations, Hu said.

The government will issue a series of new policy incentives, including preferential credit rates, export credit insurance and export rights to boost the country's software exports, Hu revealed.

The Chinese Government has issued several such incentives but software exports remain lacklustre.

The new incentives are believed to be more aggressive.

Hu did not disclose more details about the 13 regulations.

(Business Weekly June 18, 2003)